How to run payroll in Spain

Spain employers are required to pay employees monthly. The standard pay date is the last working day of each month.

Most companies process payroll between the 25th and 30th of each month to ensure funds clear by the payment deadline. You'll need to factor in bank processing times, especially for international transfers.

Payment frequency and timing

Spanish labor law mandates monthly salary payments for most employees. The payment must be made by the last working day of each month, covering work performed in that same month.

Some exceptions exist for specific industries. Construction and agricultural workers may receive weekly or bi-weekly payments, but monthly remains the standard across most sectors.

Late payments can trigger penalties and employee complaints to labor authorities. The penalty starts at €626 for first-time violations in 2026.

Extra salary payments (pagas extraordinarias)

Spain requires two additional monthly salary payments each year, known as pagas extraordinarias. These aren't bonuses - they're mandatory salary components.

The payments are typically made in:

• Summer: June or July
• Christmas: December

Each extra payment equals one month's base salary. You can't include variable pay components like overtime or commissions in the calculation.

Some companies choose to prorate these payments across all 12 months instead of paying lump sums. This requires explicit agreement in the employment contract and doesn't change the total annual amount owed.

Vacation pay calculation

Spanish employees earn vacation pay based on their annual salary, including the two extra payments. The standard entitlement is 22 working days per year, though collective agreements often provide more.

Vacation pay calculation includes:

• Base monthly salary
• Prorated portion of extra payments
• Regular allowances and supplements

When an employee takes vacation, you pay their normal salary. There's no separate vacation pay rate or premium. The key is ensuring you've accrued enough to cover the extra payments when vacation spans those months.

For employees leaving the company, you must pay out unused vacation days at their daily salary rate, calculated as: (Annual salary ÷ 365 days) × unused vacation days.

Payment methods and requirements

Spanish law requires salary payments through bank transfer to a Spanish bank account. Cash payments are only permitted for amounts under €1,000 and require written employee consent.

International companies must ensure:

• Payments are made in euros
• Transfers reach Spanish bank accounts
• Currency conversion costs don't reduce the employee's net pay

Most Spanish banks process domestic transfers within 24 hours. International transfers can take 2-3 business days, so plan accordingly to meet the last-working-day deadline.

Payslip requirements (nómina)

Every salary payment requires a detailed payslip in Spanish, called a nómina. Spanish payslips are more complex than many countries and must include specific mandatory elements.

Required payslip information:

• Employee's full name, NIE/DNI, and Social Security number
• Employer's company name, CIF, and Social Security registration
• Pay period dates
• Detailed breakdown of salary components
• All deductions (taxes, Social Security, other)
• Net amount paid
• Year-to-date totals

Payslips must be delivered before or on the payment date. Electronic delivery is acceptable if employees can access and print them easily. Many companies use specialized Spanish payroll software to ensure compliance with the complex formatting requirements.

Keep payslip records for four years minimum. Labor inspectors frequently request these during audits, and incorrect or missing payslips can result in fines starting at €626 per violation in 2026.

Before your first payroll run in Spain, you'll need Hacienda registration and a Social Security employer account. Both take 2-3 weeks to process, so start early.

Spain uses a progressive income tax system with rates from 19% to 47% for 2026. But here's what catches many employers: regional taxes add another 0.5% to 3.2% depending on the autonomous community where your employee works.

Income tax brackets

Spain's 2026 income tax combines national and regional rates. Here are the national brackets:

Regional supplements range from 0.5% (Madrid) to 3.2% (Catalonia). Madrid offers the lowest total tax burden, while Catalonia and Andalusia have the highest rates.

The first €5,550 annually remains tax-free for all employees.

Withholding requirements

You must withhold income tax from every paycheck and remit it monthly to Hacienda. The deadline is the 20th of the following month - no exceptions.

Register for Modelo 111 (monthly withholding returns) when you get your employer tax number. Late filings cost €200 minimum, plus 1% monthly interest on unpaid amounts.

Annual reconciliation happens through Modelo 190, due January 31st. This reports all employee withholdings for the tax year. Missing this deadline triggers penalties starting at €300.

Monthly filing process

Submit Modelo 111 online through Hacienda's electronic platform. Include total wages paid, tax withheld, and employee count. Payment processes automatically when you file.

Keep detailed payroll records for six years. Hacienda audits frequently focus on withholding calculations and proper regional tax application.

Tax registration

Hacienda registration requires these documents:

• Company incorporation papers
• Tax representative appointment (if non-EU company)
• Business activity classification
• Estimated annual payroll

Processing takes 15-20 business days. You'll receive a NIF fiscal number needed for all tax filings.

Social Security registration happens separately but you need both before paying employees. The Social Security number links to your tax account for cross-verification.

Special tax considerations

Non-resident employees face different rules. EU citizens get standard withholding rates, but non-EU residents pay 24% flat rate on all income until they gain tax residency.

Tax treaties can reduce withholding for short-term assignments. The US-Spain treaty allows reduced rates for stays under 183 days, but requires advance approval from Hacienda.

Regional variations matter more than most countries. An employee earning €50,000 in Madrid pays €11,435 total income tax, while the same salary in Catalonia costs €13,891.

Expatriate considerations

Foreign executives often qualify for Beckham Law treatment - 24% flat tax rate for six years instead of progressive rates. This requires advance application and saves significant tax on high salaries.

Digital nomads and remote workers pay tax based on where they physically work, not company location. Track work locations carefully for employees splitting time between regions.

Common tax mistakes

Wrong regional tax rates top the error list. Many payroll systems default to Madrid rates, creating underpayment issues in higher-tax regions like Catalonia or Valencia.

Penalty: €150-€600 per employee, plus interest on unpaid amounts.

Missing monthly filings happen when companies assume quarterly reporting like other countries. Spain requires monthly Modelo 111 submission by the 20th.

Penalty: €200 minimum, escalating to €20,000 for repeat offenses.

Incorrect non-resident withholding occurs when applying progressive rates to non-EU employees who should pay 24% flat rate.

Penalty: €1,000-€10,000 plus full tax liability correction.

Annual reconciliation errors happen when year-end Modelo 190 doesn't match monthly filings. Cross-check all submissions before the January 31st deadline.

Penalty: €300-€20,000 depending on discrepancy size and company revenue.

The biggest employer cost in Spain? Social security contributions at 29.9%. That's nearly €18,000 on a €60,000 salary before you add other mandatory contributions.

Contribution breakdown

Here's what you'll pay on top of every salary in 2026:

Professional accident rates vary by industry risk level. Office workers typically fall into the lowest 0.5% bracket.

Total employer cost breakdown

For a €60,000 annual salary:

• Base salary: €60,000
• Social security: €17,940
• Unemployment: €3,300
• Training: €360
• Total employer cost: €81,600
• Cost multiplier: 1.36

You'll pay 36% more than the base salary for most office positions.

Contribution caps and high earners

Spain uses contribution bases, not salary caps. The 2026 maximum contribution base is €4,720.50 monthly (€66,087 annually).

For employees earning above €66,087, your contributions plateau. A €100,000 salary costs the same in contributions as a €66,087 salary - about €23,900 annually.

This creates a significant cost advantage for senior hires. Your effective contribution rate drops from 36% to 24% on a €100,000 salary.

Registration requirements

You must register with multiple agencies before hiring:

Each registration requires your company tax ID (NIF), business license, and planned workforce size.

Payment deadlines and penalties

Late payments incur 20% surcharges plus daily interest at 4.375% annually. A €5,000 contribution paid 30 days late costs an additional €1,018 in penalties.

The Social Security system is strict about deadlines. Set up automatic payments to avoid costly mistakes.

Maternity leave in Spain is 16 weeks at 100% pay. Here's how it affects your payroll.

The Spanish Social Security system covers maternity and paternity benefits, but you'll still need to manage the payroll calculations and coordinate with employees during their leave periods.

Annual leave

Spanish employees get 22 working days of paid annual leave as the legal minimum. That's just over four weeks you'll need to factor into your payroll planning.

Most collective agreements bump this up to 23-25 days, so check your sector's specific requirements. Vacation pay is calculated at the employee's regular daily wage rate.

Carryover rules: Employees can carry unused vacation into the next year, but it must be taken within 18 months of earning it. You can't force employees to forfeit earned vacation time.

Termination payouts: You must pay out all accrued, unused vacation days when an employee leaves. Calculate this at their final daily wage rate.

Sick leave

Spanish sick leave splits between employer and Social Security payments, creating a coordination challenge for payroll.

Days 1-3: No pay required (waiting period) Days 4-20: Employer pays 60% of the regulatory base Day 21 onwards: Social Security pays 75% of the regulatory base

You'll need medical certificates for absences longer than three days. For shorter periods, employee self-certification is usually acceptable.

The regulatory base isn't the same as gross salary. It's calculated using the employee's contribution base for Social Security, which may differ from their actual earnings.

Parental leave

Maternity leave: 16 weeks at 100% of the regulatory base, paid by Social Security. Employees can take this leave flexibly, with six weeks mandatory immediately after birth.

Paternity leave: 16 weeks at 100% of the regulatory base, also paid by Social Security. This can be taken within the first year after birth or adoption.

Both parents can take their leave simultaneously or sequentially. You don't pay these benefits directly, but you'll coordinate with Social Security and manage the employee's return to work.

Breastfeeding leave: One hour per day (or 15 minutes reduction in working hours) until the child turns nine months. This is paid at full salary by the employer.

Public holidays 2026

Spain has national public holidays plus regional and local ones. You'll need to check your specific location for the complete list.

Mandatory benefits affecting payroll

Christmas bonuses (pagas extras): Spanish law requires two extra monthly payments per year, typically in June/July and December. Each equals one month's salary.

These aren't bonuses in the traditional sense - they're mandatory additional salary payments. Many companies prorate these throughout the year rather than paying lump sums.

Meal vouchers: While not mandatory, they're tax-advantaged up to €11 per working day and extremely common. These reduce your Social Security contribution base when provided electronically.

Transportation allowances: Tax-free up to €136.36 per month for public transport season tickets.

Spain requires you to keep payroll records for four years. Lose them and face fines up to €187,515 plus potential criminal charges for serious violations.

Monthly filing requirements

You'll submit Form 111 (personal income tax withholdings) and Form 651 (social security contributions) by the 20th of each month. Both filings cover the previous month's payroll data.

The Tax Agency's electronic office (Sede Electrónica) is your submission portal. Paper filings aren't accepted for companies with more than 10 employees.

Late filing penalties start at €150 for Form 111 and scale up to 20% of unpaid contributions for social security delays. File even one day late and you're in penalty territory.

Annual reporting

The big annual deadline is Form 190 - your summary of all employee tax withholdings for 2026. This goes to the Tax Agency by January 31, 2027.

Employees need their individual tax certificates (Form 190 individual) by the same date. Most employers distribute these with January payslips to avoid last-minute scrambles.

The General Treasury of Social Security (TGSS) requires annual contribution reconciliation through the RED system. Submit this by January 31, 2027, along with any adjustments for the previous year.

Labor authorities audit roughly 8% of Spanish employers annually. They'll request four years of payroll records, employment contracts, and time-tracking data.

Employee documentation

Every employment contract must be in Spanish and include specific mandatory clauses. Missing elements make contracts legally invalid and trigger fines starting at €626 per contract.

Required contract elements include job category according to collective bargaining agreements, trial period duration (maximum six months for qualified positions), and specific working time arrangements.

Payslips need 23 mandatory elements including detailed social security contribution breakdowns and accrued vacation days. Use the official Spanish terminology - creative translations don't count.

Penalties table

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Regulatory bodies

The Tax Agency (Agencia Tributaria) handles income tax withholdings and VAT obligations. Access their electronic office at sede.agenciatributaria.gob.es for all monthly and annual filings.

The General Treasury of Social Security (TGSS) manages social security contributions and employee registrations. Use their RED system at red.seg-social.es for contribution filings and employee lifecycle management.

Labor inspectorates in each autonomous community enforce employment law compliance. They conduct unannounced audits and have broad powers to review payroll records, interview employees, and impose sanctions.

Contact the Tax Agency at 901 335 533 for technical filing questions. TGSS technical support is available at 901 502 050. Both offer English-language support during business hours.

Using 2025 tax brackets? You're withholding incorrectly. Here's what changed.

Spain updated several key payroll elements for 2026, affecting how you calculate withholdings and contributions. The changes took effect January 1, 2026, so you'll need to update your systems immediately.

Minimum wage increase

National minimum wage - Effective January 1, 2026

Spain raised the national minimum wage to €1,134 per month (€15.12 per day), up from €1,080 in 2025. This represents a 5% increase.

For employees under 18 or in their first year of employment, the rate remains at 85% of the national minimum (€963.90 per month).

Regional governments can set higher minimums, but cannot go below the national rate. Check your specific autonomous community requirements.

Tax withholding adjustments

Personal income tax brackets - Effective January 1, 2026

The tax-free threshold increased to €5,550 annually, up from €5,500 in 2025. The 19% tax bracket now applies to income between €5,550 and €12,450 (previously €12,450).

Higher earners face a new 48% bracket for income exceeding €300,000 annually. This affects withholding calculations for senior executives and high-earning professionals.

Social security contribution changes

Maximum contribution base - Effective January 1, 2026

The maximum monthly contribution base increased to €4,495.50, up from €4,339.20 in 2025. This affects employees earning above this threshold and changes your maximum employer contributions.

Unemployment contribution rates remain unchanged at 1.55% (employee) and 5.50% (employer) for permanent contracts.

Upcoming changes

Digital reporting requirements - Effective July 1, 2026

All employers must submit payroll data electronically through the new SII Nóminas system. Paper submissions will no longer be accepted after this date.

Start preparing your systems now - the transition period begins March 1, 2026.